Stephen G, we chatted yesterday about the bar and grill business that I own with my Brother. Your answer was helpful and I get it in concept ("I think"). So what I need help with right now is a specific step by step action plan to get this thing going. I will begin by re-clarifying the facts of the case and the situation AND my interpretation of your answer:
1. We have one business (a Bar & Grill) that does roughly $600k per year in revenue. We purchased the business in June of 2012. We purchased the business, the land and the building all in the same transaction
. Purchase was financed with 85% debt...with half the debt coming from the SBA and there other from a local
2. The operation is accounted for through two legal entities, both of them are Washington State LLCs and both of the them have the same 3 members...Me (45%), my brother (45%) and our dad (10%).
3. The first LLC ("Business LLC") is the whole operation essentially, it includes all the operating assets (Inventory, Furniture & Equipment, etc), and has all of the employees.
4. The second LLC ("Real Estate LLC") has no employees, it carries only the land and the building on its balance sheet along with ALL of the Debt used to finance the purchase of the business. Its only operating activity is to record rent income from the Business LLC and to service the Debt. The rent income and the debt service are equal so it has essential zero cash flow but will show a loss due to depreciation.
5. The Lenders (the bank and the SBA) view both LLC's together as "the borrower". In fact, one of them addressed their year end tax
info interest/principal recap to the first LLC and the other bank addressed its info to the second LLC. This seems strange that they can do this but probably irrelavant to the tax return so who cares.
6. As you know, I am an accountant (but not really a tax guy obviously), the only way I knew how to start my book keeping debits and credits for these two entities was to first move all of the inventory and operating assets into the "Business LLC" by simply taking the assets away from one LLC and adding them to the other LLC, with the offsetting entry in both cases being the "Members Equity" accounts...so it was essentially a contribution of assets from one LLC to the other to get things started.
7. I use Quickbooks for accounting in both LLCs, the books are clean and up to date and ready to transfer info to tax returns
8. I have Turbo Tax business Edition, lots of experience with Intuit products including Turbo Tax for individuals.
9. I need to get this done...my dad and brother are expecting big refunds and really need the money right now so filing an extension is not a favorable option at the moment. I can really "jam" on the return once I know which return (or returns) to file and which entities to include where.
My interpretation of your answer from yesterday is that I can create (right now) a brand new Tax Payer ID that I will put on a single 1065 return...and this 1065 return will include the combined results of both of our LLCs...AND I will add some kind of Tax Payer statement to the return that explains that it contains the results of both of our LLCs. Is this correct?
If it is correct, I love this idea because it will be so much easier to do one return with both LLCs included and it eliminates the issue of having to report the "transaction" involving the contribution of assets by one LLC to the other.
What I really need to know is (sorry I don't have a copy of the transcript from yesterdays chat):
1. How again do I actually create a new Tax Payer ID# XXXXX use for purposes of filing this return that combines the results of both LLCs?
2. Do I have to have a "Name" that goes along with the Tax Payer ID# XXXXX I set up and can it be just any name I decide to make up.
3. Once I have done all of this, how specifically, do a inform the IRS that this particular tax return includes the results of both or our LLCs combined.
Once I know my tax payer ID and Business name to use on the return I'm confident that I will be able to complete the return using all of the accounting info that I have in completed and summarized in Quickbooks. Very much appreciatie anything you can do to help me figure this out and will be happy to throw in a bonus and another excellent rating if you can get me through this.